Correlation Between AAP and China Dongsheng
Can any of the company-specific risk be diversified away by investing in both AAP and China Dongsheng at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining AAP and China Dongsheng into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AAP Inc and China Dongsheng International, you can compare the effects of market volatilities on AAP and China Dongsheng and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in AAP with a short position of China Dongsheng. Check out your portfolio center. Please also check ongoing floating volatility patterns of AAP and China Dongsheng.
Diversification Opportunities for AAP and China Dongsheng
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between AAP and China is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding AAP Inc and China Dongsheng International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Dongsheng Inte and AAP is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on AAP Inc are associated (or correlated) with China Dongsheng. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Dongsheng Inte has no effect on the direction of AAP i.e., AAP and China Dongsheng go up and down completely randomly.
Pair Corralation between AAP and China Dongsheng
Given the investment horizon of 90 days AAP Inc is expected to generate 1.87 times more return on investment than China Dongsheng. However, AAP is 1.87 times more volatile than China Dongsheng International. It trades about 0.1 of its potential returns per unit of risk. China Dongsheng International is currently generating about -0.1 per unit of risk. If you would invest 0.02 in AAP Inc on August 29, 2024 and sell it today you would earn a total of 0.00 from holding AAP Inc or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
AAP Inc vs. China Dongsheng International
Performance |
| Timeline |
| AAP Inc |
| China Dongsheng Inte |
AAP and China Dongsheng Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AAP and China Dongsheng
The main advantage of trading using opposite AAP and China Dongsheng positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AAP position performs unexpectedly, China Dongsheng can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in China Dongsheng will offset losses from the drop in China Dongsheng's long position.The idea behind AAP Inc and China Dongsheng International pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| China Dongsheng vs. C2E Energy | China Dongsheng vs. Tanke Biosciences | China Dongsheng vs. Supurva Healthcare Group | China Dongsheng vs. Kasten Inc |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Bonds Directory module to find actively traded corporate debentures issued by US companies.
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